Saturday, January 23, 2016

A Swot Analysis Of The New Electricity Tariff In Nigeria (2)

In the last few years,
there has been increased agitation for localisation of services in the power
sector especially in the local manufacture of smart meters. Local manufacturers
of meters now have an opportunity to showcase their capability under the local
content initiative. This will lead to the creation of jobs and business
opportunities as marketers of electricity recharge cards or vouchers just as
experienced in the Telecommunication sector will spring up along with companies
involved in metering and customer billing systems.

*Idowu Oyebanjo

A critical element that will
hold NESI in good steer is the need for a global procurement strategy or
culture where stakeholders leverage on the volume of purchase to reduce cost.
In the atmosphere of cuts, this will serve the industry well. This can start now.
As Discos seek to purchase meters in bulk, they should negotiate a fair deal in
view of the number of meters they will have to purchase. Consultants and
service providers will not be left out as installation, operation, and required
maintenance services for meters procured will be sourced. Generally speaking,
there is need to establish the Joint Qualification System (JQS) and register of
suitably pre-qualified practitioners to provide these services by the Nigerian
Content Joint Consultative forum.

Other potential
opportunities include but not limited to the provision of Demand Side Response
and Distributed Energy Resources (DERs), pursuit of revenue protection
initiatives by Discos, energy efficiency and energy conservation (as those who
waste electricity will now conserve it and therefore contribute to increased
availability of power elsewhere on the network), increased network operational
efficiency, phased introduction of feed-in-tariffs (as consumers deploy
renewable generation on their roofs), increased penetration of embedded
generation with the attendant reduction in network losses and accelerated
increase in availability of electricity supply.

The Threats

Reconstitution Of NERC

The act which established
NERC does not provide for the absence of a regulator and even though this has
been violated in the past, it is important to urgently appoint new NERC
commissioners to oversee the affairs of NESI. As can be seen from the
foregoing, there is an urgent need to reconstitute the regulator to have more
technocrats than lawyers, economists and Accountants who are, by the way, also
required. Role specific training needs to be provided as necessary. The
regulator has to be able to bark and bite!!!

Holding Discos Accountable

In allowing Discos to
pass their costs to consumers, the government through NERC has asked for
certain service level agreements (SLAs) from the Discos. It is very important
that the regulator is able to demand accountability from them going forward.
NERC needs to set KPIs to be monitored and enforced. This, in the very least
will include the distribution code which they have signed to as part of their
licence conditions. NERC can use incentives and penalties to drive the
development of NESI and make the privatisation process a success providing the
desired model for other soon to be privatised public utilities, as well as the
rest of Africa - An Opportunity for Nigeria to show leadership!

Absence Of A Customer-Friendly Regulatory Regime

The whole purpose of an
electric power system is to provide electricity to consumers. A power system is
only effective if the consumers are happy and satisfied with the level of
service received. Hence, a key measure of success of the privatisation process
is the level of customer satisfaction over time. NERC should develop an interim
and long term customer engagement and charging mechanisms such as the long run
incremental cost model accounting for network utilisation factors, contingency
analysis, peak demand and so on. NERC to further monitor investment in loss
reduction strategies to ensure consumers are not short-changed for longer than
necessary.

*Sam Amadi, NERC Chairman

Absence Of An Ombudsman For The Power Sector

An Ombudsman for the
power sector is urgently required to accelerate judicial activities related to
activities such as electricity theft and electrocution due to safety and
regulatory breaches within NESI so as to bring to book any key stakeholder
found wanting or culpable of actions that have the potential to disrupt the
nascent privatisation of the NESI.

Government's Body Language

In the recent past, Nigeria already
built up a negative history of one government reversing sales of assets and
public utilities sold to private investors by their predecessor. Hence,
investors are generally jittery about putting their monies in Nigeria. This
negative image can be gradually repaired by the government's body language and
actions. In this regard, government needs to provide unfettered assurance and
guarantee that it has no intention to truncate the privatisation process so
that Discos can begin to invest in customer metering and the much needed
network reinforcement that will yield increased availability of stable
electricity supply.

Diversified Energy Portfolio

The world is a global
village and with key players in the energy sector looking for alternative forms
of energy, the reform process will suffer major setbacks without the
diversification of the portfolio of energy sources for power generation. There
is much to be gained from the international community by way of finance and
foreign direct investment if the government increases the portfolio of energy
sources to be tapped for electricity generation. For example, government could
include, as part of the voluntary emissions reduction targets to address
"climate change", the reduction from the losses within the Nigerian
power and gas network. Using the baseline values recorded in NESI, it is easy
to attract funding from promises made by developed economies to assist
developing nations to adapt to the effect of the so called climate change.
Government can do more in the home front to encourage the increased deployment
of diverse energy resources for generation of electricity especially for micro
grid applications – off grid solar, hydro, coal etc. 55% of Nigerians who are
yet to be connected to the grid can therefore have it without recourse to the
national grid. A quick win!!!

Transmission Network

As generation
increases, the weakness of the Nigerian power transmission network will be
revealed. Hence, it is better to accelerate the revamping of the ailing
transmission and distribution networks at a rate that is commensurate with the
growth in aggregate installed generation capacity. This means there is need to
conclude the identified transmission projects that will ensure that the
country's transmission capacity is at all times greater than the aggregate
connected generation capacity. Project management must be deployed. Network
re-configuration as a full-mesh with significant levels of automation will
help.

Security Of Lives And Infrastructure

There is no gain saying
that there can be no significant development of NESI if attention is not giving
to security of lives, power equipment, gas pipelines and power network
infrastructure.